But MC Mining, formerly known as Coal of Africa, recovered losses in late trade as the market digested the possible equity raise.
MC Mining's chief executive, David Brown, said yesterday that the proceeds would be used to repay the R120m debt to the Industrial Development Corporation (IDC), which partially owns the Makhado project.
“The company is considering various debt/equity funding options with the existing IDC debt of R120m ($8.3m) plus interest to be accrued up to date of repayment and Phase1 capital requirements resolved simultaneously through a composite funding plan,” Brown said.
Earlier this month the company gave the phased development of Makhado the green light, signalling a minimum 46 years of life for the mine. The phase 1 mining and processing was expected to be outsourced to experienced third parties who have previously operated in South Africa, and would create 650 permanent employment opportunities, Brown said.
He said the company was also in advanced thermal coal off-take discussions with various parties.
The announcement comes as the company narrowed losses in the six months to December. It reported a $3.6m loss, or 2.49 cents a share, compared to a loss of $97.3m, or 69.04c a share for the previous comparative period.
Revenue fell to $15.2m from $17m and cost of sales were $12.3m from $14.4m. No dividends were declared or paid by MC Mining during the six months. It impaired $87.5m of the Vele Colliery assets in the comparative period.
The Makhado project was delayed for a year. However, the acquisition of Lukin and Salaita last year removed a major hurdle to the development of the project.
It said the delay impacted the repayment date for the IDC loan.
The company paid Akkerland Boerdery R70m ($5m) for the properties and the legal title to the properties was transferred to MC Mining’s subsidiary, Baobab, in early January. Akkerland is at the centre of a confrontation over land expropriation.
The Department of Rural Development and Land Reform and Akkerland Boerdery reached a deadlock on the equitable compensation that the minister offered to the current owners.